April 3, 2015

10 Things We Learned From Senate, House Hearings On The Governor’s Budget Proposal

The Senate and House have now both finished their agency-by-agency hearings on Gov. Wolf’s budget proposal. Here are 10 things we learned--

1. Case Of The Disappearing Budget Deficit: Right off the bat in the first week of hearings by the House, the Independent Fiscal Office said the state’s budget deficit is closer to $1.5 billion than the $2.3 billion deficit Gov. Wolf talked about in his budget address. A spokesperson Gov. Wolf said in response the deficit is a bit more than $2 billion.

2. More Short-Term Borrowing: On the second day of budget hearings, Acting State Treasurer Christopher Craig told the House Appropriations Committee Gov. Wolf’s proposed budget would require an increase in short-term borrowing in the form of tax anticipation notes to front-load the disbursement of funds for programs like the increase in funding for public schools.

It was noted that while the budget proposal calls for an increase in revenues, some of those revenue streams would not become effective until 2016—a full six months following the budget’s normal effective date.

“I would be anticipated that there would be a much more aggressive use of short-term borrowing to deploy it earlier than when sales tax revenues would come in,” Craig said.

In the second week of March, Gov. Wolf and the Treasurer’s Office increased short-term borrowing limits by $500 million to $2.5 billion to cover near-term obligations like payroll, something both offices criticized Gov. Corbett for.

3. Republicans Don’t Like Tax Increases: Maybe that’s not new, but clearly the proposed hike and extension of the Sales Tax (including extending it to nursing home fees, college tuition and funeral costs) and the increase in the Personal Income Tax generated a lot of heat from Republicans. The exception was from Republicans who favor doing away with school district property taxes and increasing the Sales Tax and/or Personal Income Tax to make up the difference. It would not be surprising to see a vote in the Senate or House on this so-called “real tax reform” idea by Republicans.

4. Have To Consider The Whole Package: The Governor’s Budget Secretary Randy Albright Monday the Senate Appropriations Committee Gov. Wolf’s budget is a comprehensive package and it should be considered that way and not picked into its constituent parts.

“We have tried to craft a budget that is comprehensive, that can’t in any way just be viewed by its individual component parts, because if that’s the way we try to break down the analysis, if we try to do one thing over here and ignore something over there that’s a contributor to the same ongoing problem, then we’re not going to serve our state in the best possible way,” Albright said.

5. Pension Reform Before The Budget: Senate Majority Leader Jake Corman (R-Centre) broadened his earlier comments by saying there would be no discussion of a state budget until there is “real, substantive pension reform.” He had earlier said there would be no discussion of any tax increases until pension reform was done.

6. Change Pensions For Current Workers: Sen. Corman also said he has 30 votes now for a proposal to change the pension system for existing employees as part of a pension reform plan. This idea was first suggested by Gov. Corbett, but rejected earlier by Republicans. On the question of whether changing an existing employee’s pension would be an impairment of an employment contract, Sen. Corman said we could always go back if we need to.

7. Chilly Reception To Wolf’s College Tuition Freeze: The PA State System of Higher Education and State-Related Universities were cool to the idea of a tuition freeze, but said they would see what happens if they received the extra funding proposed by the Governor.

“If the colleges are able to continue to maintain quality academic programs, they need the funds to do so,” she said in support of the governor's $15 million proposed funding boost to community colleges. “The percentage of Commonwealth dollars supporting community colleges statewide is about 20 percent … well below the 30 percent promised. It is certainly more than we have received in the past, but still significantly lower than state-run and state-related universities.”

8. $30 Million Hole In Judiciary Budget: Justices from the PA Supreme Court told the Senate Appropriations Committee medical benefits, pension costs, mandated cost of living increases and the continuing structural deficit mean the Judiciary needs a $30 million increase in its budget just to keep up with its basic costs.

If the Judiciary receives the zero increase budget proposed by Gov. Wolf, Justice J. Michael Eakin said the Court System would not be able to make payroll for about 10 percent of its personnel complement of 3,000. Funding at this level would cause significant delays in cases dispose or lead to courthouses closing their doors, he said.

9. Price Of Liquor: Liquor Control Board Chair Tim Holden told the House Appropriations Committee his hands are tied in negotiation with liquor suppliers because the Liquor Code requires the LCB to mark up the alcohol it sells proportional with the prices paid by the LCB.

He noted Virginia was able to get a lower price for product because they have a higher prices and suppliers sell to them at a lower cost.

House Republicans have objected to changing the current system in the past as a “revenue generating scheme” to generate more money for the state.

Holden also supported removing the limitation on stores operating expanded Sunday hours and changes that would allow casinos to offer alcohol past 2 a.m. and increase offers for complimentary drinks.

10. Sparing On Minimum Wage: One House budget hearing featured a sparring match between Rep. Seth Grove (R-York) and Acting Labor and Industry Secretary Kathy Manderino over whether raising the minimum wage from $7.25 to $10.10 as Gov. Wolf proposed is a good thing.

Rep. Grove said there are 158,000 Pennsylvanians currently earning minimum wage. Raising the wage to $10.10 would mean the hike would cost businesses over $1 billion.

“They (minimum wage increase advocates) always perpetuate a certain class of people they’re trying to help out, but it’s not the case. In Pennsylvania the average hourly worker rate is $24.40. Minimum wage workers have been on the decline for a number of years,” said Rep. Grove.

“The goal here is that good paying jobs and good earning jobs raise all boats. The goal here is that good paying jobs and good earning jobs raise all boats,” said Manderino. “We will, in Pennsylvania, as we bring employee salaries up, we will also be supporting families and we will also be supporting businesses because folks will have more disposable income to spend.”

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